The Massachusetts Supreme Judicial Court issued a decision earlier this year that affects settlements for injured workers pursuing compensation for their injuries. In the case of DiCarlo v. Suffolk Construction Co., Inc., which reviewed lower court rulings in two cases, the Court held that a workers’ compensation insurance company cannot recover its lien from a third-party settlement that has been allocated to the injured worker’s non-economic damages. Under the workers’ compensation statute, pain and suffering damages are not compensable. Therefore, the court held, the lien holder cannot assert a lien for pain and suffering damages recovered in a third-party settlement.

The cases involved two employees, both of whom were hurt in the course of employment at construction sites and collected workers’ compensation benefits. They settled agreements with third parties (construction site owners and managing contractors) that included damages for pain and suffering, among other things. The insurer then sought to be reimbursed from the employees’ recoveries, including the awards for non-economic damages.

In one case, the insurer argued before a Superior Court Judge that its lien should attach to the pain and suffering award. The judge agreed and did not approve the settlement. The employee appealed, and the appellate court reversed. In the other case, the insurer appealed from a judge’s decision to approve the settlement, and this holding was affirmed on appeal. The Appeals Court held that the employee’s awards for pain and suffering were not to be included in liens placed by the insurer.

The issue before the SJC was whether an insurer’s lien extends to damages that have been allocated to an employee’s pain and suffering. The SJC stated the rule that when an injured employee recovers workers’ compensation benefits and then secures damages for the same injury from a third party, the sum that is recovered is for the benefit of the workers’ compensation insurer. The “sum” that the insurer is entitled to recover is the gross sum that was received.

The SCJ was required to determine this gross sum and what defines an “injury.” Both employees argued that “injury” referred to something for which workers’ compensation benefits are payable. In other words, pain and suffering was excluded, and the insurer’s lien cannot reach these damages. The insurer contended that all of the damages that have been awarded to the employee are subject to the lien, including non-economic damages (pain and suffering). This is considered a broad view of “injury.”

Turning to the statute, the court stated that the term “injury” as used within the statute refers to an injury for which workers’ compensation is payable. The court found support for this interpretation later in the statute, where the language indicates that there may be an award of damages from which an insurer has no right to recover.

The court also found this interpretation was consistent with the intent of the legislature. By construing the statute as excluding damages for pain and suffering from the insurer’s lien, the court stated they were neither impinging on the insurer’s right to reimbursement nor allowing employees a double recovery.

In further support of their position, the court stated an employee is not receiving a “double recovery,” in which both workers’ compensation benefits and damages for pain and suffering are received. It is the nature of the injury that is important, rather than the dollar amounts recovered. The important aspect, the court made clear, is to ensure that the employee does not collect both benefits and damages for the same harm. In the cases before the SJC, the employees recovered for two separate harms: workers’ compensation benefits for lost wages and medical costs from the insurer, and damages for pain and suffering from the third-party defendants.

The court also emphasized that their decision furthered the legislative goal of minimizing tort litigation, giving employees an incentive to settle their claims.

At Pulgini & Norton, an experienced Boston workers’ compensation attorney can provide legal guidance and strong advocacy on behalf of your right to compensation following a work-related injury. To discuss your claim with a skilled workers’ compensation attorney, call our office today to discuss your claim at (781) 843-2200 or contact us online.